Philips reports Q2 comparable sales growth of 3% to EUR 6 billion and operational results of EUR 501 million

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1 Q Quarterly report Philips reports Q2 comparable sales growth of 3% to EUR 6 billion and operational results of EUR 501 million Second-quarter highlights Comparable sales growth of 3% particularly driven by improvements in North America, Central & Eastern Europe and India EBITA, excluding restructuring and acquisition-related charges and other items, amounted to EUR 501 million, or 8.4% of sales, compared to 7.9% of sales in Q EBITA totaled EUR 450 million, or 7.5% of sales, compared to 7.4% of sales in Q Net income amounted to EUR 274 million, compared to EUR 243 million in Q Free cash outflow was EUR 30 million, compared to a free cash inflow of EUR 214 million in Q Separation process is progressing well Frans van Houten, CEO: We are encouraged by the continuing improvement in our operational results in the second quarter of 2015, driven by strong comparable sales growth in Healthcare and strong margin improvements in Consumer Lifestyle and Lighting. While we are pleased with our progress overall and our Healthcare performance in the US in particular, we are increasingly concerned about the global macro-economic environment, particularly in China, Russia and Latin America. In Healthcare, we achieved significant operational margin improvements in the quarter. This was largely offset by a sizable negative foreign exchange impact on the margin, further investment in growth opportunities, and costs related to considerable continued efforts to improve our quality management systems. We also note that the Chinese market is becoming more difficult, which resulted in a drop in orders. We are pleased with the production and shipment ramp-up at our Cleveland manufacturing facility, although more work remains to be done. In Consumer Lifestyle, we delivered further operational results improvements, driven by excellent performance in Health & Wellness. As previously indicated, phasing of new product introductions drove exceptionally strong growth in the first quarter, leading to the lower growth rate in the second quarter. In aggregate, comparable sales growth in the first half of 2015 was well within the range of mid to high single-digit growth. In Lighting, we continued to drive strong sales growth and improve profitability levels in our LED business. Simultaneously, we sustained our conventional lighting business attractive cash and profitability profile by pro-actively optimizing our manufacturing footprint and tight cost control, despite significant market decline. As the world leader in lighting, we are confident in our ability to lead the transformation in this industry. Looking ahead, we continue to expect modest sales growth for 2015, as well as improved operational performance for the year. While we are concerned about the impact the more challenging global macro-economic environment is having on results, we expect continued operational performance improvement in 2016, reinforcing the underlying strength of our businesses. We intend to provide more details about the performance trajectory for HealthTech and Lighting Solutions at our Capital Markets Day on September 15.

2 Accelerate! and Separation Update Our Accelerate! program continues to drive improvements across the organization. In Healthcare, we optimized the end-to-end processes at one of our Volcano manufacturing facilities by running continuous-improvement Kaizen events that led to a more than 80% reduction in lead time and a 50% reduction in work-in-progress inventory for the improved lines. In Consumer Lifestyle, through our customer-centric innovation approach, we successfully launched a high-performance range of rice cookers in China with 30% faster time-to-market. This locally relevant value proposition drove strong customer preference, resulting in a 4-point market share increase since the launch. In Lighting, we reduced supply chain complexity and optimized the processes in the UK, which led to a 60% reduction in lead times for product configuration and delivery. This also drove a 50% increase in the total value of opportunities in the sales funnel and high-single-digit growth in orders volume. Overhead cost savings amounted to EUR 60 million in the second quarter. The Design for Excellence (DfX) program generated EUR 84 million of incremental savings in procurement in the quarter. Our End2End productivity program achieved EUR 36 million in productivity improvements. Philips expects to finalize the transition of the Lighting business into its own legal structure within the Philips Group by February 2016 in order to complete the separation in the first half of Philips had previously estimated that the separation costs would amount to EUR million in Now that the Company is halfway through the separation process, it anticipates lower separation costs of EUR million in 2015 and estimates that separation costs, including related restructuring, will amount to EUR million in As previously stated, Philips is reviewing all strategic options for the Lighting business, including an initial public offering and a private sale. As additional time is required for regulatory approvals, Philips is now working towards closing the sale of a majority interest in the combined LED components and Automotive lighting business to a consortium led by GO Scale Capital in the fourth quarter of As of June 30, 2015, Philips had completed 59% of the EUR 1.5 billion share buy-back program. Q Financial and Operational Overview Healthcare Healthcare comparable sales grew 8% year-on-year. Excluding restructuring and acquisition-related charges and other items, EBITA margin increased by 20 basis points to 10.7% as strong operational improvements were largely offset by a significant negative currency impact. Currency-comparable order intake showed a mid-single-digit decline year-on-year, with double-digit growth in North America offset by declines in China, Latin America and Western Europe. We are pleased that Healthcare continues to improve its sales growth and profitability, with North America making a significant and positive contribution as we increase order fulfillment out of our Cleveland facility. We again secured strategically important multi-year contracts, including a USD 500 million partnership with Westchester Medical Center Health Network. Highlighting our leadership in ultrasound imaging and advanced informatics, we introduced the Philips Lumify app-based ultrasound solution in the US. The solution combines a dedicated Philips ultrasound transducer, a compatible smart device and application, and secure cloud-enabled services with an innovative subscription model that will generate recurring revenues. Consumer Lifestyle Consumer Lifestyle comparable sales increased by 3% year-on-year, with double-digit growth at Health & Wellness and high-singledigit growth at Personal Care, in part offset by a decline at Domestic Appliances. EBITA margin, excluding restructuring and acquisitionrelated charges and other items, increased by 130 basis points to 10.7% year-on-year. The increase was largely driven by a positive mix effect and cost productivity, which were partially offset by negative currency effects. Consumer Lifestyle continues to perform well. We posted double-digit growth in Oral Healthcare, expanding market share in North America, China and Europe. We expanded leadership positions in multiple geographies, including market share gains in Mother & Child Care. Our strategic focus on innovation is illustrated by the positive reception in North America, China, and Europe for our new Philips Sonicare toothbrushes as well as the Sonicare AirFloss Pro. Lighting Lighting comparable sales declined 3% year-on-year. Growth in LED lighting sales of 21% was offset by a decline in overall conventional lighting sales of 16%. LED sales now represent 40% of total Lighting sales, compared to 34% in Q EBITA margin, excluding restructuring and acquisition-related charges and other items, improved by 140 basis points to 9.6% year-on-year, despite a significant Quarterly report Q2 2

3 negative currency impact on the margin. This increase was driven by the continued improvement in LED lighting margins, continued cost management, and ongoing pro-active optimization of the manufacturing footprint. We are pleased to have further improved our EBITA margin despite a sizable decline in comparable conventional lighting sales. We continue to take action to mitigate the impact of unfavorable end-market conditions in countries like China and underperformance in Professional Lighting Solutions North America. We are excited by the reception of our new, innovative products and systems in the market place. For example, we installed our intelligent connected LED system at a Carrefour supermarket in Lille, France, which will reduce the total lighting-based electricity consumption by 50% and enable our customer to provide location-based services, such as promotions, to shoppers smartphones. We also introduced the Warm Glow Clear LED bulb, which resembles traditional glass incandescent bulbs. We will outfit the New NY Bridge, which will replace the Tappan Zee bridge, with cloud-based connected LED lighting which features dynamic colorful effects that can be programmed remotely. Innovation, Group & Services Sales amounted to EUR 136 million in the second quarter of 2015, a decline from EUR 142 million in the second quarter of 2014, mainly because higher revenues from IP Royalties and Group Innovation were offset by the divestment of the OEM remote controls business. EBITA was a net cost of EUR 124 million, reflecting increased innovation investments and costs of EUR 27 million related to the separation of the Lighting business, compared to a net cost of EUR 68 million in the second quarter of The fast growing Digital Pathology business is driving the digital transformation in pathology. As a world first, Philips has enabled Netherlands-based LabPON to become the first clinical pathology laboratory in the world to have transitioned completely to digital diagnosis. Philips ultrafast pathology scanner, information management system and services will improve laboratory efficiency, quality and service levels. Conference call and audio webcast Frans van Houten, CEO, and Ron Wirahadiraksa, CFO, will host a conference call for investors and analysts at 10:00 am CET to discuss the results. A live audio webcast of the conference call will be available on the Philips Investor Relations website.

4 Philips Group Net income in millions of EUR unless otherwise stated Q Q Sales 4,969 5,974 EBITA as a % of sales 7.4% 7.5% EBIT as a % of sales 5.9% 5.8% Financial income (expenses) (74) (74) Income taxes (32) (48) Results investments in associates 3 (1) Net income from continuing operations Discontinued operations Net income Net income attributable to shareholders per common share (in EUR) - diluted Net income Net income was EUR 274 million, compared to EUR 243 million in Q The increase was mainly due to improved earnings as a result of higher volumes. EBITA amounted to EUR 450 million, or 7.5% of sales, compared to EUR 368 million, or 7.4% of sales, in Q Restructuring and acquisition-related charges amounted to EUR 24 million, mainly related to the acquisition of Volcano. EBITA also included EUR 27 million of charges related to the separation of the Lighting business. Restructuring and acquisitionrelated charges in Q amounted to EUR 26 million. EBITA, excluding restructuring and acquisitionrelated charges and other items, was EUR 501 million, or 8.4% of sales, compared to EUR 394 million, or 7.9% of sales, in Q Currency effects had an impact on EBITA margin of -1.4 percentage points of sales. Tax charges of EUR 48 million were EUR 16 million higher than in Q2 2014, mainly due to higher earnings. The impact of the retrospective application of favorable tax regulations relating to R&D investments in Q was offset by the release of tax provisions in Q Press Release Q2 2015

5 Sales by sector in millions of EUR unless otherwise stated Q Q % change Healthcare 2,137 2,754 29% 8% Consumer Lifestyle 1,073 1,248 16% 3% Lighting 1,617 1,836 14% (3)% Innovation, Group & Services (4)% 5% Philips Group 4,969 5,974 20% 3% Sales per geographic cluster in millions of EUR unless otherwise stated Q Q % change nominal comparable nominal comparable Western Europe 1,283 1,351 5% 1% North America 1,570 2,032 29% 3% Other mature geographies % 9% Total mature geographies 3,235 3,857 19% 3% Growth geographies 1,734 2,117 22% 3% Philips Group 4,969 5,974 20% 3% Sales per sector Group sales amounted to EUR 5,974 million, an increase of 3% on a comparable basis. Group nominal sales increased by 20%, mainly due to positive currency effects and portfolio changes. Healthcare comparable sales grew 8% year-on-year. Imaging Systems achieved strong double-digit growth, Patient Care & Monitoring Solutions posted mid-single-digit growth, and Healthcare Informatics, Solutions & Services as well as Customer Services recorded low-single-digit growth. Consumer Lifestyle comparable sales increased by 3%. Health & Wellness achieved double-digit growth, while Personal Care posted high-single-digit growth and Domestic Appliances recorded a mid-singledigit decline. Lighting comparable sales showed a 3% decline year-on-year. Professional Lighting Solutions posted a low-single-digit decline. Light Sources & Electronics recorded a mid-single-digit decline and Consumer Luminaires posted a high-single-digit decline. Sales per geographic cluster Growth geographies recorded 3% comparable sales growth year-on-year, driven by Consumer Lifestyle and Healthcare. Double-digit growth in Central & Eastern Europe and India was partly offset by a decline in China and Russia & Central Asia. Comparable sales in mature geographies increased 3% year-on-year. Western Europe and North America posted low-single-digit growth. Other mature geographies achieved high-single-digit growth, mainly driven by solid growth in Japan and Australia. Press Release Q

6 EBITA in millions of EUR unless otherwise stated Q Q amount % amount % Healthcare % % Consumer Lifestyle % % Lighting % % Innovation, Group & Services (68) (124) Philips Group % % EBITA excluding restructuring and acquisition-related charges and other items in millions of EUR unless otherwise stated Q Q amount % amount % Healthcare % % Consumer Lifestyle % % Lighting % % Innovation, Group & Services (64) (105) Philips Group % % EBIT in millions of EUR unless otherwise stated Q Q Healthcare Consumer Lifestyle Lighting Innovation, Group & Services (71) (127) Philips Group as a % of sales 5.9% 5.8% Earnings per sector Healthcare EBITA increased by EUR 50 million yearon-year. Excluding restructuring and acquisitionrelated charges and other items, EBITA amounted to EUR 296 million, or 10.7% of sales, compared to EUR 224 million, or 10.5% of sales, in Q The increase was largely driven by higher volumes, which were partly offset by negative currency impacts, an increase in Quality & Regulatory spend, and higher planned expenditure for growth initiatives at Healthcare Informatics, Solutions & Services. Consumer Lifestyle EBITA increased by EUR 35 million year-on-year. Excluding restructuring and acquisition-related charges, EBITA was EUR 134 million, or 10.7% of sales, compared to EUR 101 million, or 9.4% of sales, in Q The improvement was mainly due to product mix and cost productivity. Lighting EBITA increased by EUR 53 million year-onyear. EBITA, excluding restructuring and acquisitionrelated charges, was EUR 176 million, or 9.6% of sales, compared to EUR 133 million, or 8.2% of sales, in Q The increase was mainly driven by cost productivity at Light Sources & Electronics and Professional Lighting Solutions. Innovation, Group & Services EBITA decreased by EUR 56 million year-on-year. Excluding restructuring and acquisition-related charges and other items, EBITA was a net cost of EUR 105 million, compared to a net cost of EUR 64 million in Q The net cost increase was mainly due to higher Group and Regional costs, higher costs in the IT Service Units, and investments in emerging business areas, partly offset by higher licensing revenue in IP Royalties. 6 Press Release Q2 2015

7 Cash balance in millions of EUR Q Q Beginning cash balance 1,727 1,667 Free cash flow 214 (30) Net cash flow from operating activities Net capital expenditures (196) (216) Acquisitions and divestments of businesses (57) 26 Other cash flow from investing activities (72) (47) Treasury shares transactions (235) (107) Changes in debt 10 4 Dividend paid (248) (253) Other cash flow items (10) (51) Net cash flow discontinued operations 106 (74) Ending balance 1,435 1,135 Cash balance The cash balance decreased during Q to EUR 1,135 million, with a free cash outflow of EUR 30 million, which included an outflow of EUR 73 million related to settlement payments in connection with the Cathode Ray Tube (CRT) antitrust litigation. The cash balance was also impacted by the use of EUR 107 million in treasury shares transactions, primarily for the share buy-back program, and by EUR 253 million related to cash dividend. Q also included a net cash outflow of EUR 74 million, mainly related to the operations of the combined businesses of Lumileds and Automotive. In Q the cash balance decreased to EUR 1,435 million, with a free cash inflow of EUR 214 million, which included an outflow of EUR 31 million in the form of a pension contribution related to the derisking of the Dutch pension plan. The cash balance was impacted by a EUR 110 million investment outflow related to the former TP Vision joint venture, EUR 248 million of cash dividend, as well as the use of EUR 235 million in treasury shares transactions, primarily for the share buy-back program. Q also included a net cash inflow of EUR 106 million from discontinued operations, mainly related to the sale of WOOX Innovations and the operations of the combined businesses of Lumileds and Automotive. Cash flows from operating activities in millions of EUR Cash flows from operating activities Operating activities resulted in a cash inflow of EUR 186 million, compared to an inflow of EUR 410 million in Q An increase in working capital was partly offset by higher earnings. (256) Q Q1 15 Q Gross capital expenditures 1) in millions of EUR Gross capital expenditures Gross capital expenditures on property, plant and equipment were EUR 10 million above the level of Q2 2014, with increases in the operating sectors and higher investments at IG&S. 92 Q Q1 15 Q ) Capital expenditures on property, plant and equipment only Press Release Q

8 Inventories in millions of EUR unless otherwise stated 17.3% 17.0% 15.9% 3,916 3,973 Inventories 3,638 as a % of sales Inventories Inventory value at the end of Q was EUR 4.0 billion and amounted to 17.0% of sales. Compared to Q2 2014, inventories as a percentage of sales increased by 1.1 percentage points. The increase was mainly driven by currency impacts. Q ,2) Q1 15 1,2) Q ,2) 1) Sales is calculated over the preceding 12 months 2) Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations Net debt and Group equity in billions of EUR unless otherwise stated Group equity 4.5 Net debt Net debt and Group equity At the end of Q2 2015, Philips had a net debt position of EUR 4.5 billion, compared to EUR 2.3 billion at the end of Q During the quarter, the net debt position increased by EUR 427 million, reflecting a EUR 105 million decrease in debt and a EUR 532 million decrease in liquidity. Group equity remained flat in the quarter at EUR 11.5 billion. Q : 82 Q : 74 Q : 72 ratio Number of employees in FTEs 107, , ,578 Employees The number of employees increased by 1,339 yearon-year. Reductions in headcount as a result of the industrial footprint rationalization at Lighting were more than offset by the GLC acquisition in the Kingdom of Saudi Arabia, the Volcano acquisition, and an increase in third-party workers. The number of employees decreased by 1,719 compared to Q1 2015, largely due to industrial footprint rationalization at Lighting. Q ,2) Q1 15 1,2) Q ,2) 1) Number of employees excludes discontinued operations. Discontinued operations had 8,689 employees in Q (Q1 2015: 8,334, Q2 2014: 8,256). 2) Number of employees includes 13,796 third-party workers in Q (Q1 2015: 13,930, Q2 2014: 12,483). 8 Press Release Q2 2015

9 Healthcare Key data in millions of EUR unless otherwise stated Q Q Sales 2,137 2,754 Sales growth % nominal (10)% 29% % comparable (4)% 8% EBITA as a % of sales 10.5% 10.0% EBIT as a % of sales 8.7% 8.0% Net operating capital (NOC) 7,457 9,213 Number of employees (FTEs) 1) 37,157 39,523 1) Number of employees includes 2,898 third-party workers in Q (Q2 2014: 2,599). Sales in millions of EUR 2,849 2,754 2,137 Q ,234 Q3 14 Q4 14 2,261 Q1 15 Q EBITA in millions of EUR unless otherwise stated 13.7% % 10.5% 275 EBITA % as a % of sales 65 Business highlights Philips and Westchester Medical Center Health Network entered into a multi-year, USD 500 million managed services partnership to transform and improve healthcare for 3 million patients. The agreement includes consulting services, medical technologies and clinical informatics solutions, and aims to improve all care areas, including radiology, cardiology, neurology, oncology and pediatrics. Continuing their focus on long-term collaboration to optimize hospital care and operational performance, Philips and the Sint Maartenskliniek in the Netherlands extended their existing 10-year managed services partnership by 5 years. The agreement includes ultrasound and healthcare IT services in addition to current access to radiology solutions. Working together to address the shift toward valuebased care, Philips and Banner Health in the US announced the successful results of their at-home Intensive Ambulatory Care pilot program for patients with multiple chronic conditions. Through the joint telehealth program, Banner Health achieved 27% cost savings, driven primarily by a 45% reduction in hospital re-admissions. Philips introduced its Lumify app-based ultrasound solution in the US. Combining a dedicated Philips ultrasound transducer, a compatible smart device and app, and secure cloud-enabled services, Lumify has been designed to enable faster diagnosis, improve patient satisfaction and reduce costs, while generating recurring revenues. Exploring locally relevant solutions, the Rhiza Foundation and its technology partner Philips launched a mobile clinic pilot project focused on delivering basic primary healthcare, mother and child healthcare and dental care in particular to thousands of people living in townships in South Africa who have little or no access to healthcare facilities. Q (151) (6.8)% Q3 14 Q4 14 Q1 15 Q Financial performance Currency-comparable order intake showed a midsingle-digit decline year-on-year. Healthcare Informatics, Solutions & Services achieved doubledigit growth and Patient Care & Monitoring Solutions posted high-single-digit growth, while Imaging Systems recorded a double-digit decline. Currency-comparable order intake in mature geographies showed high-single-digit growth. North America achieved double-digit growth and other mature geographies posted high-single-digit growth, while Western Europe posted a low-single-digit decline, following a strong first quarter. Growth geographies recorded a double-digit decline, mainly due to double-digit declines in China and Latin America, reflecting deteriorating market conditions. Press Release Q

10 EBITA excluding restructuring and acquisition-related charges and other items in millions of EUR unless otherwise stated 10.5% 224 Q % 267 Q % 421 Q % 123 Q % 296 Q EBITA excluding restructuring and acquisition-related charges and other items as a % of sales Comparable sales grew 8% year-on-year. Imaging Systems achieved strong double-digit growth, Patient Care & Monitoring Solutions posted midsingle-digit growth, and Healthcare Informatics, Solutions & Services and Customer Services recorded low-single-digit growth. Comparable sales in mature geographies showed mid-single-digit growth. Other mature geographies achieved strong double-digit growth and Western Europe and North America posted mid-single-digit growth. Growth geographies recorded double-digit growth. EBITA amounted to EUR 275 million, or 10.0% of sales, compared to EUR 225 million, or 10.5% of sales, in Q Restructuring and acquisition-related charges amounted to EUR 21 million, mainly related to the Volcano acquisition. Restructuring and acquisitionrelated charges in Q amounted to a net release of EUR 1 million. Excluding restructuring and acquisition-related charges and other items, EBITA amounted to EUR 296 million, or 10.7% of sales, compared to EUR 224 million, or 10.5% of sales, in Q The increase was largely driven by higher volumes, which were partly offset by negative currency impacts, an increase in Quality & Regulatory spend, and higher planned expenditure for growth initiatives at Healthcare Informatics, Solutions & Services. Net operating capital, excluding a currency translation effect of EUR 1,317 million, increased by EUR 439 million year-on-year. This increase was largely driven by the Volcano acquisition, partly offset by higher provisions. Inventories as a percentage of sales* increased by 2.0 percentage points year-on-year, mainly driven by currency impacts and production ramp-up at the Cleveland facility. Compared to Q2 2014, the number of employees increased by 2,366, largely driven by the Volcano acquisition. Compared to Q1 2015, the number of employees increased by 622, mainly due to increases in production at Imaging Systems and Patient Care & Monitoring Solutions. Miscellaneous Restructuring and acquisition-related charges in Q are expected to total approximately EUR 35 million. *Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations 10 Press Release Q2 2015

11 Consumer Lifestyle Key data in millions of EUR unless otherwise stated Q Q Sales 1,073 1,248 Sales growth % nominal (1)% 16% % comparable 7% 3% EBITA as a % of sales 9.3% 10.8% EBIT as a % of sales 8.0% 9.7% Net operating capital (NOC) 1,271 1,674 Number of employees (FTEs) 1) 16,886 16,547 1) Number of employees includes 4,041 third-party workers in Q (Q2 2014: 3,953). Sales in millions of EUR 1,528 1,190 1,248 1,073 Q ,114 Q3 14 Q4 14 Q1 15 Q EBITA in millions of EUR unless otherwise stated 16.4% 251 Business highlights Philips Oral Healthcare delivered double-digit growth, expanding the category and increasing Philips market share in North America, China and Europe. Sales growth was driven by the Philips Sonicare DiamondClean, Series 2 and Series 3 toothbrushes and the newest innovation in interdental cleaning, the Philips Sonicare AirFloss Pro. A diversified portfolio of innovations delivered results for Male Grooming in the quarter, with Asian markets particularly strong. In Japan, the ongoing success of the premium Philips Shaver series 9000 drove market share, as did continued demand for Philips VisaPure for Men. In South Korea, Philips Shaver series 7000, a proposition for sensitive skin, is selling well, while in India the launch of affordable beard trimmers in tier 2 and 3 cities drove strong growth. Philips Avent further built its leadership position in mother and child care, delivering double-digit growth, with exceptional performance in North America and China. Sales were driven by the continued expansion of infant and toddler feeding solutions that support healthy development, including the Philips Avent Natural, Classic+ and new cups range. Partnerships with leading beauty retailers, global propositions and locally relevant innovations continue to drive strong growth in Beauty. The Philips Lumea hair-removal device performed well in European markets. In India, an affordable hair straightener was successfully launched, recruiting more young women to home hairstyling, while Chinese women responded enthusiastically to new haircare innovations, including Philips EasyShine Ionic styling brushes. 10.2% 9.3% Q Q3 14 Q % 135 Q % 135 EBITA as a % of sales Q Financial performance Comparable sales increased by 3% year-on-year. Health & Wellness achieved double-digit growth, while Personal Care posted high-single-digit growth and Domestic Appliances recorded a mid-singledigit decline. As previously indicated, phasing of new product introductions drove exceptionally strong growth in the first quarter, leading to the lower growth rate in the second quarter. Comparable sales in growth geographies showed mid-single-digit growth. Mature geographies recorded low-single-digit growth. North America and other mature geographies recorded low-single-digit growth, while Western Europe was in line with Q EBITA amounted to EUR 135 million, or 10.8% of sales, compared to EUR 100 million, or 9.3% of sales, in Q EBITA included restructuring and acquisitionrelated charges amounting to a net release of EUR 1 million, compared with a cost of EUR 1 million in Q Press Release Q

12 EBITA excluding restructuring and acquisition-related charges and other items in millions of EUR unless otherwise stated 10.6% 9.4% Q Q % 244 Q % 136 Q % 134 Q EBITA excluding restructuring and acquisition-related charges and other items as a % of sales Excluding restructuring and acquisition-related charges, EBITA was EUR 134 million, or 10.7% of sales, compared to EUR 101 million, or 9.4% of sales, in Q The improvement was mainly due to product mix and cost productivity. Net operating capital, excluding a currency translation effect of EUR 181 million, increased by EUR 222 million year-on-year. The increase was largely driven by higher working capital. Inventories as a percentage of sales* were broadly in line with Q The number of employees decreased by 339 compared to Q2 2014, mainly due to reductions in Asia Pacific. Compared to Q1 2015, the number of employees decreased by 501, largely due to a reduction in third-party workers at Domestic Appliances and Personal Care. Miscellaneous Restructuring and acquisition-related charges in Q are expected to be less than EUR 5 million. *Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations 12 Press Release Q2 2015

13 Lighting (Excluding the combined businesses of Lumileds and Automotive) Key data in millions of EUR unless otherwise stated Q Q Sales 1,617 1,836 Sales growth % nominal (8)% 14% % comparable (2)% (3)% EBITA as a % of sales 6.9% 8.9% EBIT as a % of sales 5.6% 7.4% Net operating capital (NOC) 4,558 4,070 Number of employees (FTEs) 1) 37,191 35,962 1) Number of employees includes 5,149 third-party workers in Q (Q2 2014: 4,556) Sales in millions of EUR 1,975 1,836 1,617 Q ,705 Q3 14 Q4 14 1,719 Q1 15 Q EBITA in millions of EUR unless otherwise stated 8.9% 164 EBITA 7.4% 6.9% 6.9% as a % of sales (40) (2.0)% Q Q3 14 Q4 14 Q1 15 Q Business highlights In Lille, France, Carrefour will install 2.5 kilometers of Philips LED lighting that uses light to transmit a location signal to a shopper s smartphone, triggering an app to provide location-based services. This enables Carrefour to provide new services to its shoppers, such as helping them to navigate and find promotions across the 7,800 square-meter shop floor. It is the world s largest connected lighting indoor positioning system for retail and reduces the total lighting-based electricity consumption of the hypermarket by 50%. Philips will provide a connected LED lighting system for the New NY Bridge in New York, which will replace the Tappan Zee bridge. It will combine roadway and architectural lighting, an industry first, on what will be the most technologically advanced bridge in North America. The system will feature remotely programmed lights that produce dynamic colorful effects and use Philips ActiveSite and Philips CityTouch cloud-based remote monitoring and management systems. In India, Philips won an order for 15 million 7W LED lamps from Energy Efficiency Services Limited, as part of the Indian government s initiative to promote energy-efficient lighting for households and help reduce electricity consumption at peak periods. Based on consumer insights, Philips successfully introduced the Warm Glow Clear LED bulb, which mimics traditional bulbs, in North America. Similar in light quality and shape, it now also turns to a classic warm light when dimmed. The lamp will become available in other regions later this year, for professional as well as consumer use. Financial performance Comparable sales showed a 3% decline year-onyear. Professional Lighting Solutions posted a lowsingle-digit decline. Light Sources & Electronics recorded a mid-single-digit decline and Consumer Luminaires posted a high-single-digit decline. Comparable sales in mature geographies showed a low-single-digit decline compared to Q Growth geographies recorded a mid-single-digit decline, mainly due to China. LED-based sales grew 21% year-on-year and now represent 40% of total Lighting sales, compared to 34% in Q Conventional-based sales declined 16% year-on-year and now represent 60% of total Lighting sales, compared to 66% in Q Press Release Q

14 EBITA excluding restructuring and acquisition-related charges and other items in millions of EUR unless otherwise stated 8.2% 133 Q % 156 Q % 178 Q % 144 Q % 176 Q EBITA excluding restructuring and acquisition-related charges and other items as a % of sales EBITA amounted to EUR 164 million, or 8.9% of sales, compared to EUR 111 million, or 6.9% of sales, in Q Restructuring and acquisition-related charges amounted to EUR 12 million, compared to EUR 22 million in Q EBITA, excluding restructuring and acquisitionrelated charges, was EUR 176 million, or 9.6% of sales, compared to EUR 133 million, or 8.2% of sales, in Q The increase was mainly driven by improved cost productivity at Light Sources & Electronics and Professional Lighting Solutions. Net operating capital, excluding a currency translation effect of EUR 576 million, decreased by EUR 1,064 million year-on-year. The decrease was mainly due to the reclassification of the combined businesses of Lumileds and Automotive as assets held for sale in Q Inventories as a percentage of sales* increased 1.2 percentage points year-on-year, mainly due to currency impacts. Compared to Q2 2014, the number of employees decreased by 1,229, reflecting a decrease from industrial footprint rationalization, partially offset by the GLC acquisition in the Kingdom of Saudi Arabia. Compared to Q1 2015, the number of employees decreased by 2,064, mainly driven by a seasonal decrease at production sites. Miscellaneous Restructuring and acquisition-related charges in Q are expected to total approximately EUR 30 million, mainly driven by industrial footprint rationalization. *Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations 14 Press Release Q2 2015

15 Additional information on the combined businesses of Lumileds and Automotive The combined businesses of Lumileds and Automotive are reported as discontinued operations in the Consolidated statements of income and cash flows. As a result, Lumileds and Automotive sales and EBITA are no longer included in the Lighting and Group results of continuing operations. The applicable assets and liabilities of the combined businesses are reported under Assets and Liabilities classified as held for sale in the Condensed consolidated balance sheets as per November As announced on March 31, 2015, Philips has signed an agreement with a consortium led by GO Scale Capital, through which they will acquire an 80.1% interest in Philips combined LED components and Automotive lighting business, with Philips retaining the remaining 19.9%* interest. As additional time is required for regulatory approvals, Philips is now working towards closing the sale in the fourth quarter of Results of combined Lumileds and Automotive businesses in millions of EUR unless otherwise stated Q Q EBITA as previously reported in Lighting Adjustment of amortization and depreciation following assets held for sale reclassification 49 Disentanglement costs (14) Former net costs allocated to Lighting (1) Former net costs allocated to IG&S Amortization of other intangibles added back (6) EBIT of discontinued operations Income taxes (9) (21) Net income of discontinued operations Number of employees (FTEs) 8,256 8,689 In Q2 2015, the net income of discontinued operations attributable to the combined businesses of Lumileds and Automotive increased to EUR 49 million from EUR 32 million in Q EBITA in Q included disentanglement costs of EUR 14 million, compared to nil in Q Overhead and other indirect costs of Philips that were previously allocated to Lumileds and Automotive and were not affected by the transfer to Discontinued operations have been allocated to Lighting and IG&S (Former net costs allocated to Lighting and IG&S). *including a 34% interest in Lumileds US operations Press Release Q

16 Innovation, Group & Services Key data in millions of EUR unless otherwise stated Q Q Sales Sales growth % nominal 3% (4)% % comparable 3% 5% EBITA of: Group Innovation (47) (62) IP Royalties Group and Regional Costs (37) (85) Accelerate! investments (32) (29) Pensions (3) (4) Service Units and Other (11) (14) EBITA (68) (124) EBIT (71) (127) Net operating capital (NOC) (2,786) (3,560) Number of employees (FTEs) 1) 13,344 13,885 1) Number of employees includes 1,709 third-party workers in Q (Q2 2014: 1,375) Sales in millions of EUR Business highlights Philips entered into a five-year research alliance with the Massachusetts Institute of Technology (MIT) to develop breakthrough innovations in HealthTech and Connected Lighting. Philips will move its North American research center to Cambridge, Mass. to engage with the area s rich innovation ecosystem. Applying the deep consumer insights of Philips unique, multi-disciplinary design team to professional healthcare, Philips has expanded its healthcare experience consultancy services with cocreation workshops with the C-suite of existing and prospective customers. The first series of workshops successfully demonstrated the value that Philips can create for its customers, for example in terms of productivity improvements and patient satisfaction, reinforcing customer intimacy. As a pioneer and leader in the emerging digital pathology market, Philips has enabled Netherlandsbased LabPON to become the first clinical pathology laboratory in the world to have transitioned completely to digital diagnosis. Philips ultrafast pathology scanner, information management system and services will improve laboratory efficiency, quality and service levels. For the second consecutive year, Philips received the Champion for Change award from Practice Greenhealth, North America s leading membership and networking organization for institutions in the healthcare community, in recognition of its green health practices and sustainability initiatives with its customers and across the organization. Q Q3 14 Q4 14 Q1 15 EBITA in millions of EUR (68) (89) (151) Q (124) Financial performance Sales decreased from EUR 142 million in Q to EUR 136 million. Higher revenue from IP Royalties and Group Innovation was offset by lower sales in the OEM remote controls business following its divestment. EBITA amounted to a net cost of EUR 124 million, compared to a net cost of EUR 68 million in Q EBITA included EUR 27 million of charges related to the separation of the Lighting business. Restructuring charges amounted to a net release of EUR 8 million, compared to a cost of EUR 4 million in Q (339) Q Q3 14 Q4 14 Q1 15 Q Press Release Q2 2015

17 EBITA excluding restructuring and acquisition-related charges and other items in millions of EUR (64) Q (67) Q3 14 (100) Q4 14 (76) Q1 15 (105) Q Excluding restructuring and acquisition-related charges and other items, EBITA was a net cost of EUR 105 million, compared to a net cost of EUR 64 million in Q The net cost increase was mainly due to higher Group and Regional costs, higher costs in the IT Service Units, and investments in emerging business areas, partly offset by higher licensing revenue in IP Royalties. Net operating capital, excluding a currency translation effect of EUR 314 million, decreased by EUR 460 million year-on-year, mainly due to a decrease in working capital. Compared to Q2 2014, the number of employees increased by 541, primarily driven by growth at the Philips Innovation Campus in Bangalore. The number of employees increased by 224 compared to Q Miscellaneous Restructuring and separation charges in Q are expected to total approximately EUR 85 million. Press Release Q

18 Philips statistics in millions of EUR unless otherwise stated Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 4,692 4,969 5,194 6,536 5,339 5,974 comparable sales growth % (1)% (1)% 0% (2)% 2% 3% Gross margin 1,900 2,075 1,702 2,529 2,116 2,495 as a % of sales 40.5% 41.8% 32.8% 38.7% 39.6% 41.8% Selling expenses (1,166) (1,214) (1,245) (1,499) (1,341) (1,440) as a % of sales (24.9)% (24.4)% (24.0)% (22.9)% (25.1)% (24.1)% G&A expenses (167) (176) (191) (213) (214) (224) as a % of sales (3.6)% (3.5)% (3.7)% (3.3)% (4.0)% (3.7)% R&D expenses (396) (400) (372) (467) (436) (483) as a % of sales (8.4)% (8.0)% (7.2)% (7.1)% (8.2)% (8.1)% EBIT (139) as a % of sales 3.7% 5.9% (2.7)% 2.5% 2.6% 5.8% EBITA (62) as a % of sales 5.4% 7.4% (1.2)% 4.0% 4.3% 7.5% Net income (loss) (103) Net income (loss) attributable to shareholders (104) Net income (loss) - shareholders per common share in EUR - diluted (0.11) January- March January- June January- September January- December January- March January- June Sales 4,692 9,661 14,855 21,391 5,339 11,313 comparable sales growth % (1)% (1)% (1)% (1)% 3% 3% Gross margin 1,900 3,975 5,677 8,206 2,116 4,611 as a % of sales 40.5% 41.1% 38.2% 38.4% 39.6% 40.8% Selling expenses (1,166) (2,380) (3,625) (5,124) (1,341) (2,781) as a % of sales (24.9)% (24.6)% (24.4)% (24.0)% (25.1)% (24.6)% G&A expenses (167) (343) (534) (747) (214) (438) as a % of sales (3.6)% (3.6)% (3.6)% (3.5)% (4.0)% (3.9)% R&D expenses (396) (796) (1,168) (1,635) (436) (919) as a % sales (8.4)% (8.2)% (7.9)% (7.6)% (8.2)% (8.1)% EBIT as a % of sales 3.7% 4.8% 2.2% 2.3% 2.6% 4.3% EBITA as a % of sales 5.4% 6.4% 3.8% 3.8% 4.3% 6.0% Net income Net income attributable to shareholders Net income - shareholders per common share in EUR - diluted Net income from continuing operations as a % of shareholders equity 4.0% 5.7% 2.0% 2.0% 2.4% 5.3% January- September January- December Number of common shares outstanding (after deduction of treasury shares) at the end of period (in thousands) 913, , , , , ,277 Shareholders equity per common share in EUR Inventories as a % of sales 1,2) 14.8% 15.9% 17.1% 15.3% 17.3% 17.0% Net debt : group equity ratio 15:85 18:82 19:81 17:83 26:74 28:72 Net operating capital 10,381 10,500 10,841 8,838 10,977 11,397 Total employees 114, , , , , ,606 of which discontinued operations 9,957 8,256 8,489 8,313 8,334 8,689 1) Sales is calculated over the preceding 12 months 2) Inventories as a % of sales excludes inventories and sales related to acquisitions, divestments and discontinued operations 18 Press Release Q2 2015

19 Reconciliation of non-gaap performance measures Certain non-gaap financial measures are presented when discussing the Philips Group s performance. In the following tables, reconciliations to the most directly comparable IFRS measures are presented. Sales growth composition in % Q2 January to June comparable growth currency effects consolidation changes nominal growth comparable growth currency effects consolidation changes nominal growth 2015 versus 2014 Healthcare Consumer Lifestyle Lighting (3.3) (3.1) IG&S (11.0) (4.2) (4.3) 8.9 Philips Group EBITA excluding restructuring and acquisition-related charges and other items to Income from operations (or EBIT) in millions of EUR unless otherwise stated Philips Group Healthcare Q2 January to June Consumer Lifestyle Lighting Innovation, Group & Services Philips Group Healthcare Consumer Lifestyle Lighting Innovation, Group & Services 2015 EBITA excluding restructuring and acquisition-related charges and other items (105) (181) Other items (27) (27) (66) (28) (38) Restructuring and acquisition-related charges (24) (21) 1 (12) 8 (82) (51) (37) 6 EBITA (or Adjusted income from operations) (124) (213) Amortization of intangibles 1) (101) (56) (14) (28) (3) (192) (104) (27) (54) (7) Income from operations (or EBIT) (127) (220) 2014 EBITA excluding restructuring and acquisition-related charges and other items (64) (167) Restructuring and acquisition-related charges (26) 1 (1) (22) (4) (77) (20) (1) (52) (4) EBITA (or adjusted income from operations) (68) (171) Amortization of intangibles 1) (77) (39) (14) (21) (3) (155) (81) (26) (42) (6) Impairment of goodwill (3) (1) (2) Income from operations (or EBIT) (71) (177) 1) Excluding amortization of software and product development Press Release Q

20 Reconciliation of non-gaap performance measures (continued) Net operating capital to total assets in millions of EUR unless otherwise stated June 30, 2015 Philips Group Healthcare Consumer Lifestyle Lighting IG&S Net operating capital (NOC) 11,397 9,213 1,674 4,070 (3,560) Exclude liabilities comprised in NOC: - payables/liabilities 9,835 3,106 1,311 1,631 3,787 - intercompany accounts (275) - provisions 3, ,786 Include assets not comprised in NOC: - investments in associates other current financial assets other non-current financial assets deferred tax assets 2,838 2,838 - cash and cash equivalents 1,135 1,135 Total assets excluding assets classified as held for sale 29,189 13,350 3,204 6,301 6,334 Assets classified as held for sale 1,698 Total assets 30,887 December 31, 2014 Net operating capital (NOC) 8,838 7,565 1,353 3,638 (3,718) Exclude liabilities comprised in NOC: - payables/liabilities 9,379 2,711 1,411 1,422 3,835 - intercompany accounts (319) - provisions 3, ,902 Include assets not comprised in NOC: - investments in associates other current financial assets other non-current financial assets deferred tax assets 2,460 2,460 - cash and cash equivalents 1,873 1,873 Total assets excluding assets classified as held for sale 26,739 11,274 3,049 5,739 6,677 Assets classified as held for sale 1,613 Total assets 28,352 June 29, 2014 Net operating capital (NOC) 10,500 7,457 1,271 4,558 (2,786) Exclude liabilities comprised in NOC: - payables/liabilities 8,527 2,585 1,392 1,761 2,789 - intercompany accounts (247) - provisions 2, ,601 Include assets not comprised in NOC: - investments in associates other current financial assets other non-current financial assets deferred tax assets 1,832 1,832 - cash and cash equivalents 1,435 1,435 Total assets excluding assets classified as held for sale 25,523 10,519 2,908 6,832 5,264 Assets classified as held for sale 136 Total assets 25, Press Release Q2 2015

21 Reconciliation of non-gaap performance measures (continued) Composition of net debt to group equity in millions of EUR unless otherwise stated June 29, December 31, June 30, Long-term debt 3,336 3,712 4,048 Short-term debt ,632 Total debt 3,768 4,104 5,680 Cash and cash equivalents 1,435 1,873 1,135 Net debt (cash) (total debt less cash and cash equivalents) 2,333 2,231 4,545 Shareholders equity 10,747 10,867 11,396 Non-controlling interests Group equity 10,758 10,968 11,511 Net debt and group equity 13,091 13,199 16,056 Net debt divided by net debt and group equity (in %) 18% 17% 28% Group equity divided by net debt and group equity (in %) 82% 83% 72% Composition of cash flows in millions of EUR Q2 January to June Cash flows provided by (used for) operating activities (70) Cash flows used for investing activities (325) (237) (501) (1,507) Cash flows before financing activities 85 (51) (364) (1,577) Cash flows provided by (used for) operating activities (70) Net capital expenditures: (196) (216) (354) (403) Purchase of intangible assets (21) (27) (32) (55) Expenditures on development assets (73) (83) (141) (155) Capital expenditures on property, plant and equipment (107) (117) (189) (209) Proceeds from sale of property, plant and equipment Free cash flows 214 (30) (217) (473) Press Release Q